Derivatives - Weekly View - March 11, 2022 - ICICI Direct

Nifty

Despite starting the week on a pessimistic note and breaching 15700 levels on Monday, the Nifty ended the week with gains of around 2.5% with the help of a recovery in technology and pharma stocks. Moreover, indices were able to gain despite continued FII selling pressure who sold almost Rs. 30000 crore in the last five sessions. The volatility index has also declined considerable during the week and closed near 25 levels despite ongoing global jitters and uncertainty.

On the data front, significant short additions were seen in the headline indices during the month so far. While the bank nifty open interest is one of the highest ever seen, the Nifty open interest is also at a multi month high. A short covering move can be expected if the Nifty remains above 16500 in coming sessions and may move towards 17000, 17200 levels ahead of Fed policy.

Bank Nifty

In the current leg of the sell-off, the Bank Nifty has relatively underperformed as huge shorts were formed where the Bank Nifty future open interest rose to historical highs. As broader markets reverted, the Nifty managed to gain almost 2.5% whereas the Bank Nifty ended only 0.5% higher.

Most private banks saw addition of short positions along with Call writing in ATM and OTM strikes. On the positive side, we feel there could be limited downsides as despite a sharp surge in volatility across the globe, India VIX failed to sustain above 30 levels and ended the week near 25.

Positional Future Recommendation

PI Industries

Rationale

The stock witnessed a sharp correction in January where future open interest rose by 37%. For the past two months, the stock has been consolidating at lower levels supported by delivery based buying, which is a positive sign. The stock has shown initial sign of short covering as a gradual reduction in OI was seen. We expect short covering to pick up from current levels as the stock has successfully managed to sustain above Rs. 2550, which was the previous hurdle area.

Havells

Rationale

The stock has been under continuous selling pressure for the past few months. Even in the current leg of the broader market rally it has underperformed the Nifty, which indicates weakness. From the start of the March series, the stock witnessed short build up as future open interest rose around 20%. On the option front, aggressive OI addition was seen in OTM Calls, which indicates limited upside. With the current close below its support of Rs. 1100, we expect it to witness a fresh round of sell-off.

For details, click on the link below:

Link to the report

Source : Equity Bulls

Keywords

Nifty BankNifty Derivative3s Futures Options WeeklyView ICICIDirect